Ten Years Ago on Grasping Reality: July 10, 2008

Summary:
Department of "Huh?" General Motors Bailout Edition: Why oh why can't we have a better press corps? Why oh why do we watch the New York Times in a death spiral? Why does it publish Roger Lowenstein telling us that: "Extravagant Pensions Are Killing General Motors.... G.M. acknowledged in its most recent annual report that from 1993 to 2007 it... has been sending far more money to its retirees than to its owners..." When GM offered the UAW more lavish benefits, it did so in order to induce the UAW to accept less generous wages. The money that GM paid in the 1990s and 2000s to fund pension and retiree health benefits was offset by wages that GM did not have to pay in the 1960s, 1970s, and 1980s. Lowenstein appears to want to live in a world in which GM (a) gets a break on its wage costs in

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Department of "Huh?" General Motors Bailout Edition: Why oh why can't we have a better press corps? Why oh why do we watch the New York Times in a death spiral? Why does it publish Roger Lowenstein telling us that: "Extravagant Pensions Are Killing General Motors.... G.M. acknowledged in its most recent annual report that from 1993 to 2007 it... has been sending far more money to its retirees than to its owners..." When GM offered the UAW more lavish benefits, it did so in order to induce the UAW to accept less generous wages. The money that GM paid in the 1990s and 2000s to fund pension and retiree health benefits was offset by wages that GM did not have to pay in the 1960s, 1970s, and 1980s. Lowenstein appears to want to live in a world in which GM (a) gets a break on its wage costs in the 1960s, 1970s, and 1980s; and can do so (b) without having to pay any money to fund pensions in the 1990s and 2000s. I don't want to live in Roger Lowenstein's world.

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.